01.06.22.06.13.07.03.08.24.08.14.09.05.10.26.10.16.11.07.12.28.12.18.01.08.02.01.03.21.03.11.04.02.05.20.05.10.06.01.07.22.07.OJSC Gazprom OJSC Gazprom published on July its audited consolidated financial statement for 2004 8, as prepared in accordance with the International Accounting Standards.

Sales proceeds ( less excise, VAT and customs duties ) increased by 157023 ml rubles ( or by 19%) to reach 976776ml rubles in 2004 as compared to 2003. Gas net sales proceeds increased by 116 ml rubles ( or by 18% ) to reach 767 458 ml rubles in 2004 as compared to 2003. Operating costs increased by 115 528 ml rubles (or by 19% ) to reach 708 943 ml rubles in 2004 as compared to the similar period in 2003. A share of operating costs in the sales proceeds accounted for 73% and 72% in 2004 and 2003 respectively. The amount of profit tax increased by 5 071 ml rubles ( or by 7%) to reach 79 888 ml rubles in 2004 as compared to 74817 ml rubles in 2003. Total rate of taxation reduced from 32% in 2003 to 28% in 2004. The amount of net profit increased by 46 589 ml rubles ( or by 29% ) to reach 205 684 ml rubles in 2004 as compared to the similar period in 2003.

RAO EES of Russia Outcomes of the Annual General Meeting of Shareholders of RAO EES of Russia, which was held at Zelenograd on June 29 2005, were summed up in July. The minutes of the Meeting containing official voting results on the agenda was signed by Yakov Urinson, Vice Chairman of RAO EES of Russia. According to the document, those who participated at the Annual General Meeting of Shareholders of RAO EES of Russia ( on the basis of preliminary registration performed by CJSC STATUS Registrar Society ) had 37 256 773 231 votes according to the number of common shares held, which accounts for 90.8% of the total number of common shares of RAO EES of Russia. The Annual General Meeting of Shareholders approved the 2004 annual report of RAO EES of Russia, annual accounting reports, including profit and loss account report ( profit and loss account ), as well as distribution of profit and loss according to the results of the fiscal year.

The annual report contains basic information on financial and economic operations and structure of the Joint Stock Company. Earnings of RAO EES of Russia was 34 460 744 thousand rubles in 2004.

Foreign Exchange Market The trends in the Russian foreign exchange market reflected the global trends for gradual increase in the USD exchange rate vs. the Euro. A short-term USD weakening was observed only after the news on terrorists acts in London. This resulted in that the USD exchange rate varied in the range of 1.19 – 1.20 during the first week. High oil prices, which kept strong and large supply of foreign currency in the domestic market, didn’t let the RUR exchange rate go down.. However, the USD began to clime down in the FOREX market, after the news on adoption of the European Constitution and referendum in Luxemburg as well as positive figures relating to business activity in France and Germany. In addition, increasing threat of terrorist acts also weakened the USD exchange rate. The USD exchange rate continued to fluctuate thus reflecting the movement in the FOREX market.

In the period between July 1 and 22, the USD exchange rate declined by 0.05 rubles (-0.17%) to reach 28.58 rubles per US dollar. Total volume of trading on USD in the SELT electronic trading system was nearly $25.89 ml US dollars with an average weighted turnover being $1.62 ml US dollars ( nearly $26.44 ml US dollars with an average weighted turnover being $1.56 ml US dollars in June ) in the period between July 1 and 22. Maximum volume of trading on USD over the foregoing period was recorded at nearly $3.29 bln US dollars on July 21, minimal was $954.5 ml US dollars on July 4.

RUR liquidity in the Russian banking sector remained unchanged in July as compared to June figures: balances on corresponding accounts of credit organizations with the Bank of Russia averaged nearly 253.6 bln rubles in July against 250.1 bln rubles in June.

Figure Dynamics of the Official USD/RUR and EUR/RUR Exchange Rates in 2004-40.Official USD/RUR exchange rate 39.Official EUR/RUR exchange rate 38.37.36.35.34.33.32.31.30.29.28.27.In the period between July 1 and 25, the Euro exchange rate dropped by $0.004 (–0.32% ) down to 1.2065 US dollars per Euro in the world market. At the same time, the Russian market saw a slightly strengthened European currency exchange rate vs. the RUR. In the period between July 1 and 22, the EURO exchange rate vs. RUR increased by 0.18 руб. ( 0.51% ) from 34.63 to 34.80 rubles per Euro.

Total volume of trading on the Euro in the SELT electronic trading system was nearly 162.97 million Euro with an average weighted turnover being 10.19 million Euro ( nearly 51.78 million Euro with an average weighted turnover being 8.93 million Euro in June ). In July these figures are slightly above the similar parameter in June. Maximum volume of trading on the Euro over the same period was recorded at the level of 15.18 million on July 19, while the minimum was 4.54 million Euro on July 11.

2005 3.61% 3.39% 3.09% 3.66% – 2007 5.23% 4.68% 4.46% 4.49% 4.6% 2010 6.26% 5.72% 5.52% 5.38% 5.3% 2018 6.74% 6.26% 5.91% 5.68% 5.8% 2028 7.24% 6.76% 6.40% 6.25% 6.3% 2030 6.51% 6.03% 5.65% 5.48% 5.5% МБК-MIACR one-day loan rate ( as % per year at 1.49% 5.54% 5.71% 7.53% 2.0% the end of the month ) official RUR/USD exchange rate at the end of the 27.8256 27.7726 28.0919 28.6721 28.month ( RUR/USD ) official RUR/Euro exchange rate at the end of the 36.0564 36.0072 35.1963 34.5241 34.month ( RUR/Euro ) USD/EURO 01.05.31.05.30.06.30.07.29.08.28.09.28.10.27.11.27.12.26.01.25.02.27.03.26.04.26.05.25.06.Month March April May June July* incremental growth in official RUR/USD ex- 0.19% -0.19% 1.15% 2.07% 0.1% change rate per month ( % ) incremental growth in official RUR/Euro exchange -1.56% -0.14% -2.25% -1.91% 0.4% rate per month ( % ) RTS stock market turnover per month ( ml US 363.30 347.72 203.62 435.69 dollars by stock included into the list of stocks for the RTS index calculation ) RTS -1 index value at the end of the month 669.42 671.61 674.44 707.52 Changes in the RTS -1 index per month ( % ) -6.58% 0.33% 0.42% 4.90% 10% * Estimate D. Polevoi Real Economy Sector: Trends and Factors According to the preliminary outcomes, the GDP value grew by 5.6% in the first half of against 7.6% in the same period of the previous year. Industrial production growth accounted for 4.% as compared to the first half of 2004, which is by 3.3 percentage points below the similar parameter of the previous year. Growth in of the construction work volume accounted for 5.8% against 14.2% in the previous year. Capital investments grew by 9.4% against 12.6% in the same period of the previous year under intensive growth in the gross national savings. A share of capital investments accounted for 14.1% of GDP in the first half of 2005.

IET’s macroeconomic estimates for the end of 2005 show that ongoing high movements of external and investment demand remain principal growth factors under the current trends and scenary changes of economic environment. The GDP is expected to grow by 5.1 to 5.5% in 2004 as compared to the previous year, provided that the expected growth of capital investments vary in the range of 109.5 to 110.0%, exports in the range of 122.8 - 126.6%% and a share of the unemployed in total number of the work force is at the level of 7.6%.

The first half of 2005 was characterized by a weakening growth intensity almost for all types of economic activity. According to the preliminary outcomes, the GDP grew by 5.6% in the first half of 2005 against 7.6% in the same period of the previous year. The structure of the produced GDP was dominated by retarding growth rates in industrial production and construction works, which was compensated by continuously stable movements relating to retail turnover and services. Industrial production by 4.0 % as compared to the first half of 2004, which is by 3.3 percentage points below the similar parameter in the previous year, while construction works grew up by 5.8% against 14.2% of the previous year. Moderate movements of the industrial production growth was one of the factors that slowed down growth rates in transport freight turnover to 2.8% against 7.8% in the first half of 2004.

Favorable external economic conditions continued to have a positive effect on the overall economic situation. However, economic growth rates became dependant to a larger degree on both the level of demand and price fluctuations in the world market and production capacity of mining industries under a high concentration of domestic exports within a small group of raw materials. Growth of exports accounted for 40.6% in terms of value in the period between January and May 2005, which exceeded by 13.7 percentage points the similar parameter in the previous year. It should be noted that almost 4/percent of export of goods the first half of 2005 is explained by extremely high prices of fuel and energy resources, metallic minerals and metals in the world markets. Profitability of the products sold during the Quarter 1, 2005 accounted for 27.1% for fuel and energy minerals and 58% for metallic minerals and other types of mineral products with the 15.0% average level of profitability for the economy as a whole. However, the growth of revenues from export operations had no significant effect on economic growth rates.

The production index in mining operations slowed down to 101.4% in the first half of 2005, including production of oil ( down to 102.2% ) and metallic minerals ( down to 98.7% ). Consequently, this resulted in retardation of export growth rates down to 105.9% in physical terms against 111.7% in the first half of 2004. In spite of exclusively favorable prices of hydrocarbons, production performance was dominated by reduction of oil export growth rates down to 101.5%.

I II I II I II II Q II Q II Q I Q I Q I Q 2003. 2004. 2005.

industrial production transport freight turnover volume of work in constriction retail turnover Figure 1. Industrial Production Growth Rates by Type of Economic Activity in 2003 – 2005, as % of corresponding quarter of the previous year Development of the Russian economy has been characterized by a moderate level of domestic consumer goods production over the last two years. The rate of food products production accounted for 104.2% with a decline of non-food products by nearly 3.5% in the first half of 2005.

Continuous profitability of Russian foods products is determined by inertial processes of post-crisis adaptation of production to the traditional structure of consumer preferences and activation of the investment policy on modernization and reconstruction of production in 2000 - 2003. Food production is leading in the industrial production in terms of replacement of fixed assets. The fixed asset replacement coefficient has been accounting for 2.9% in food production over the last five years with the average production figure being 1.5% in the economy as a whole. Growth of imports was kept down by expanding competitive food production facilities on the basis modern technological methods. In addition, such fundamental factors as changes in the retail turnover structure and imports for the sake of organized forms, as well as formation of systems of promotion of Russian goods in the domestic market should be mentioned as well.

The situation in the non-food products market is aggravated by the fact that poor activity of the domestic business has been provoking aggressive import at the backgrounds of advancing growth in real personal incomes and wages relative to retail turnover.

Gradual improvement of social parameters in economic development were responsible for steady expansion of households final consumption this year. Real personal incomes growth accounted for 8.3%, real wages for 8.0 % and real amount of monthly pension entitlements for 7.2% in the first half of 2005 as compared to the similar period in the previous year.